An Accredited Education

What are the types of options?

Video Transcription

Hello again. Casey Jensen here at Options Animal. Now, we’re going to discuss the four different types of option contracts. First, let’s talk about a long call. What you’re doing is you’re buying the right to buy a stock. Now, a short call, you’re taking on an obligation to sell a stock. Now, if you look at put options, we buy a put, we have the right to sell a stock. When we sell a put or short a put, we’re taking on an obligation to buy the stock. The easy way to break it down, anytime you buy an option, you have a right to do something. Anytime you sell an option, you take on an obligation to do something.

Now, we’ll talk about the motivations and different reasons why you might use all four of these but the important thing to remember is you do need to understand all four. You’ll be able to use them dynamically to help accomplish your investing goals, whether it’s trying to supplement your retirement income or you’re trying to have aggressive growth perhaps and double your account. We’ll kind of keep it simple. Again, remember, when you buy, you have a right. When you sell, you have an obligation.